(Yicai Global) May 21 -- The recent mortgage rate increases of major banks in Shenzhen should have a limited immediate impact on the market, according to buyers and real estate agents.

The hikes are bearable, potential housing purchasers in the southeastern tech hub told Yicai Global. They result in small increases when divided into monthly payments over the next 30 years, they added.

Changes, if any, would probably be seen in purchasing in Shenzhen during the third quarter, according to market participants. In April, housing benchmarks published by various institutions were stable in the city that has been becoming increasingly expensive over recent years.

The municipality has sought to cool down overheating. After Guangzhou, Shenzhen became China's second first-tier city to boost its housing loan lending rates across the board this year.

Local branches of China's four big state lenders, including the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Bank of China, and the Bank of Communications, as well as some smaller joint-stock banks, raised their mortgage rates as of yesterday after the Shenzhen branch of China Construction Bank did the same on May 6.

First-home mortgage rates were hiked by 15 basis points to 5.1 percent, 45 bips above the loan prime rate. Rates for those eyeing their second residential property were hiked 35 bips to 5.6 percent.

The moves were unexpected. China's benchmark loan rate, the LPR, has remained unchanged for 13 straight months, the People's Bank of China said in a statement yesterday.

Moreover, liquidity doesn't seem to be an issue. "The quota is quite sufficient so far," said an employee at a large state bank. "The funds will be transferred to your bank account in early June if you apply now." A worker at another bank confirmed that the loan quota is not too tight.

Stricter Review

The increases won't have a very big impact on the market, said He Qianru, director at property brokerage Midland Holdings China. Instead, the biggest obstacle for speculators to buy property is still loan taker qualifications, she added.

Banks in Shenzhen are tightening their oversight of borrowers' financial health. Loan applicants need to provide bank statements over the past six months to prove that the down payment for the first home doesn't contain borrowed money, according to an article published yesterday.

Rate Hikes Across China

The hikes have been more modest in other cities. In 42 key cities, buyers of their first homes had an average mortgage rate of 5.33 percent between April 20 and May 18, up from the 5.31 logged a month earlier, according to Rong360 Big Data Research Institute. The rate for buyers of second homes also rose by 2 bips to 5.61 percent. Three cities had increases higher than 10 bips.

Chinese residents' weighted interest rates of housing loans averaged 5.37 percent in March, up from the 5.33 recorded in late 2020, according to the PBOC. The increase was the first seen since January 2020.

Editor: Emmi Laine, Xiao Yi